The current tax environment is complex, leaving many taxpayers feeling uncertain about their existing tax positions and future plans. In the face of an IRS audit or challenge, one unexpected tax liability can do severe damage, leading to a failed transaction or loss of expected tax benefits.
Topics: Taxes, Insurance, Private equity, venture capital, Private Equity & Venture Capital, PE/VC, portfolio companies, tax insurance
Many private equity (PE) and venture capital (VC) firms have organized fund entities in non-U.S. jurisdictions, such as the Cayman Islands. As such, the analysis and reporting from a Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standards (CRS) perspective continues to be an important part of overall tax compliance for these firms. PE/VC firms with funds organized in the Cayman Islands will want to take note of recent updates made to the Cayman Islands Department for International Tax Cooperation (DITC) portal, as well as key upcoming compliance dates.
Topics: Private Equity & Venture Capital, PE/VC
President Biden’s latest budget proposal calls again for higher corporate and individual tax rates, ordinary tax rates for carried interest, and proposes a new “Billionaire’s Minimum Tax” that would subject wealthy individuals to a minimum 20% tax rate on income that includes unrealized capital gains. These and other tax proposals were outlined in the Treasury Department’s annual Green Book on March 28. The Green Book represents the President’s “wish list” for tax policy, while Congress must draft and pass any associated legislation. Although the fate of the Build Back Better Act (BBBA) remains stalled in the Senate, the Green Book is intended to help shape ongoing and future negotiations in Congress.
The major points from this year’s Green Book and some observations follow. We begin with major business provisions, and continue with individual provisions most likely to be relevant to the Private Equity and Venture Capital (PE/VC) space.
Topics: tax planning, Private equity, venture capital, Private Equity & Venture Capital, PE/VC, Biden, President Biden, Green Book, Biden Administration
The SEC has recently proposed new disclosure requirements for hedge funds and private equity funds which have the potential to impact the extent and timeliness of reporting for these types of investment vehicles.
Topics: Private equity, Private Equity & Venture Capital, PE/VC, portfolio companies investment, SEC, hedge funds, Financial Stability Oversight Council
On February 16, the IRS issued additional relief for certain pass-through entities required to file new Schedules K-2 and K-3, along with a set of “Frequently Asked Questions.” The relief is outlined in News Release IR-2022-38 and Schedules K-2 and K-3 Frequently Asked Questions (Forms 1065, 1120S, and 8865). This additional relief was in response to the widespread commentary among tax return preparers and taxpayers in the current filing season. Under the new relief, certain taxpayers will not need to file the new Schedules K-2 and K-3 relating to partnerships and S corporations.
Topics: IRS, pass-through entities, Private Equity & Venture Capital, PE/VC, Schedule K-3, Schedule K-2
Private fund advisors could face a financial statement audit and other reporting requirements under proposed rule changes from the Securities and Exchange Commission (SEC). Released in early February, the slew of suggested updates to the Investment Advisers Act of 1940 would affect both registered private fund advisors (including those required to be registered) and non-registered fund advisors.
Topics: Private Equity & Venture Capital, PE/VC, SEC
In a move to protect fund information, the Securities and Exchange Commission (SEC) recently proposed cybersecurity rules for registered fund advisors and investment companies. The updates to the Investment Advisers Act of 1940 would require a minimum set of cyber risk management protocol for registered funds, and additional disclosure requirements for funds that experience an information security incident.
Topics: Private Equity & Venture Capital, PE/VC, SEC
On Jan. 25, 2022, the IRS and Treasury issued final regulations on their approach to treat domestic partnerships as aggregates of their partners for purposes of Subpart F provisions applicable to U.S. shareholders of controlled foreign corporations (CFCs). Simultaneously, the IRS and Treasury released proposed regulations regarding the treatment of domestic partnerships and S corporations that own stock of passive foreign investment companies (PFICs) and their domestic partners and shareholders.
Topics: Private Equity & Venture Capital, PE/VC
Securities and Exchange Commission (SEC) regulations cover more than just companies with publicly traded stock. Enforcement results from the 2021 fiscal year hold valuable lessons for companies that manage investment funds, including those in the private equity and venture capital (PE/VC) sector.
Topics: Private Equity & Venture Capital, PE/VC, SEC
The Financial Accounting Standards Board (FASB) has been evaluating accounting standards for the past several years to identify the requirements that could be streamlined. One area that received recent attention involves accounting for convertible instruments and contracts in an entity’s own equity under ASC Topic 815, Debt.
Topics: Private Equity & Venture Capital, PE/VC, debt, convertible debt, ASC 2020-06
